Step-by-step guide to the Export Promotion Capital Goods scheme. Learn eligibility, export obligation calculations, DGFT application process, and how to clear machinery at 0% BCD with licensed CHA support.
The EPCG scheme allows Indian manufacturers and exporters to import capital goods at 0% Basic Customs Duty, saving 7.5–10% of CIF value. In exchange, you must fulfill an export obligation of 6 times the duty saved within 6 years. Our licensed CHA team assists with DGFT filing, customs clearance, and obligation tracking.
The EPCG scheme is a Government of India export incentive that allows qualifying businesses to import capital goods at 0% Basic Customs Duty. In exchange, the importer must export goods or services worth 6 times the duty saved within 6 years from the licence issue date.
By removing the 7.5–10% BCD layer, EPCG reduces the total landed cost of machinery from 28–32% to roughly 18% (IGST only). For a manufacturer importing INR 50 lakh of equipment annually, this represents a cash saving of INR 3.75–5 lakh per year — capital that can be reinvested into production. The scheme is administered by the Directorate General of Foreign Trade (DGFT) under the Foreign Trade Policy 2023 and is available to all sectors except those on the negative list. Unlike a subsidy, EPCG is a duty deferral: you only pay if you fail to meet the export obligation.
Manufacturers, merchant exporters tied to supporting manufacturers, and service exporters with a valid IEC code are eligible for the EPCG scheme. New exporters without prior export history may also qualify under relaxed norms, though existing manufacturers with steady export performance secure DGFT approval faster.
A manufacturing identity means your IEC registration with DGFT classifies you as a manufacturer rather than a trader. This requires submission of factory licence, electricity connection proof, and GST registration showing manufacturing activity. Merchant exporters can apply only when linked to a supporting manufacturer who holds the EPCG licence jointly. Service exporters — including hotels, hospitals, and software companies — became eligible under the 2021 FTP revision, provided they have foreign exchange earnings. New exporters with zero export history can apply under a reduced export obligation of 75% of the standard 6× multiplier, but must provide a bank guarantee of 25% of the duty saved.
EPCG saves you the Basic Customs Duty on capital goods — typically 7.5% of CIF value. Your export obligation equals 6 times this saved amount, payable in FOB export value over 6 years. For a USD 1,00,000 machine, this means saving ₹6,22,500 in duty against a ₹37,35,000 export target.
Consider a CNC machining centre imported from Germany at CIF value of USD 1,00,000. At an exchange rate of 83 INR/USD, the CIF value in rupees is ₹83,00,000. At the standard BCD rate of 7.5%, the duty saved under EPCG is ₹6,22,500. The export obligation is 6 × ₹6,22,500 = ₹37,35,000 in FOB export value, spread over 6 years. This averages ₹6,22,500 per year — a figure most established exporters achieve through 2–3 shipments. Without EPCG, total duty paid would be approximately ₹23,24,000 (BCD + SWS + IGST). With EPCG, you pay only IGST of roughly ₹14,94,000 — a cash saving of ₹8,30,000 at import, deferred against future exports.
Applying for an EPCG licence involves eight steps from eligibility check to EODC closure. The full cycle spans 6–8 weeks for DGFT licence approval plus 6 years for export obligation fulfillment, with quarterly reporting required throughout the obligation period.
Step 1 — Check Eligibility: Verify your IEC is active and your DGFT profile shows the correct exporter category. Step 2 — Calculate Duty Saved: We compute the exact BCD saving based on CIF value and HS code. Step 3 — Prepare Documents: IEC certificate, CA-certified export performance for the last 3 years, technical specifications of machinery, and bank statements. Step 4 — File Online at DGFT: Submit ANF 5A through dgft.gov.in with a Class 3 digital signature. Step 5 — Receive EPCG Licence: DGFT regional office issues the licence in 2–4 weeks; some cases require a factory site inspection. Step 6 — Import Capital Goods: Present the EPCG licence during Bill of Entry filing; customs assesses duty at 0% BCD. Step 7 — Track Export Obligation: We file quarterly statements with DGFT, matching shipping bills against the obligation. Step 8 — Obtain EODC: After 100% export obligation fulfillment, DGFT issues the Export Obligation Discharge Certificate, formally closing the licence.
DGFT requires four core document categories for every EPCG application: IEC proof, a CA-certified export performance statement, detailed machinery specifications with HS codes, and financial statements. Each document must be current and match the IEC holder's registered legal name exactly to avoid rejection.
| Document | Purpose |
|---|---|
| IEC Certificate | Proof of import-export registration with DGFT |
| CA-certified export performance | Shows past export track record (last 3 years) |
| Plant and machinery details | Description, HS code, technical specs, CIF value |
| Bank statement / CA certificate | Financial credibility proof |
| Digital signature (Class 3) | Required for dgft.gov.in portal filing |
| EPCG application form (ANF 5A) | Standard DGFT application format |
EPCG applies to capital goods at 0% BCD with a future export obligation, while Advance Authorisation covers raw materials for specific export products. DFIA is a transferable, post-export duty exemption for inputs. All three schemes can be used simultaneously by the same business.
| Feature | EPCG | Advance Authorisation | DFIA |
|---|---|---|---|
| What it covers | Capital goods (machinery, equipment) | Raw materials, inputs, components | Raw materials, inputs |
| Duty benefit | 0% BCD only | 0% duty on all heads (BCD, SWS, IGST) | 0% duty on all heads |
| Export obligation | 6× duty saved in 6 years | Linked to specific export product & quantity | Linked to export product; transferable |
| When applied | Before import | Before import | After export |
| Can combine? | Yes | Yes | Yes |
As your licensed customs house agent, we classify machinery under the correct HS code, calculate the precise export obligation, prepare your DGFT application, clear goods at 0% BCD using the EPCG licence, and track quarterly obligation filings for the full 6-year period.
Our engagement starts before you place the purchase order. We review machine specifications and assign the correct 8-digit HS code, then model the duty saving and export obligation so you can decide whether EPCG makes financial sense. Once you commit, we prepare the ANF 5A application, coordinate with your CA for export certification, and file digitally with DGFT. During customs clearance, we present the EPCG licence at the time of Bill of Entry filing, ensuring customs assesses duty at 0% BCD rather than the standard 7.5%. After import, we maintain a live tracker of your export obligation, reconciling shipping bills against DGFT records every quarter. When the obligation is complete, we file for EODC. This end-to-end service ensures you never miss a deadline or face unexpected duty demands.
EPCG applicants most commonly fail by miscalculating export obligations, importing goods before licence approval, installing machinery at unregistered premises, or missing quarterly DGFT filings. Each mistake can trigger duty recovery of 7.5–10% of CIF plus 15% annual interest.
Mistake 1 — Importing before licence issue: Customs will assess full duty if the EPCG licence is not active at the time of Bill of Entry. Fix: wait for DGFT approval before shipping. Mistake 2 — Wrong HS code on application: If the imported machine does not match the HS code on the EPCG licence, customs rejects the 0% BCD claim. Fix: we verify HS codes against technical brochures before application. Mistake 3 — Installing at a different address: EPCG requires machinery to be installed at the registered manufacturing premises. Installing at a branch office or warehouse voids the licence. Fix: register all installation locations in advance. Mistake 4 — Missing quarterly filings: DGFT mandates quarterly progress reports. Missing 2 consecutive filings triggers a show-cause notice. Fix: we automate quarterly reconciliation and filing for all clients.
EPCG (Export Promotion Capital Goods) is a Government of India export incentive scheme that allows manufacturers, merchant exporters, and service exporters to import capital goods — machinery, equipment, and components — at 0% Basic Customs Duty (BCD). In return, the importer commits to an export obligation of 6 times the duty saved, to be fulfilled within 6 years from the date of EPCG licence issue.
Manufacturers of goods, merchant exporters tied to supporting manufacturers, and service exporters (hotels, hospitals, software companies) are eligible. You must have a valid IEC (Import Export Code) and, for manufacturers, a manufacturing identity. New exporters with no export history may also apply under a reduced export obligation norm.
The export obligation is 6× the duty saved (at BCD rate on CIF value of capital goods), to be fulfilled within 6 years. For example, if you import machinery worth USD 1,00,000 CIF and save ₹6 lakh in BCD, your export obligation is ₹36 lakh in FOB export value over 6 years. An average export obligation of ₹6 lakh per year is required.
You can import any capital goods required for manufacturing the exported products — including new and pre-used plant and machinery, jigs, fixtures, dies, moulds, and spare parts (up to 10% of CIF value). Capital goods must be installed at the registered manufacturing premises.
DGFT processes EPCG applications within 2–4 weeks of complete application submission. Digital signature is required for online filing at dgft.gov.in. Your regional DGFT office may take longer if documents are incomplete or if a site inspection is required.
If the export obligation is not fulfilled within 6 years, you must pay the full customs duty that was exempted, plus interest at 15% per annum from the date of import, and a penalty under the Customs Act. DGFT can also debar you from future export incentive schemes.
Yes. EPCG has no restriction on country of origin. You can import capital goods from China, Germany, Japan, South Korea, USA, or any country. The scheme applies to the imported machinery regardless of its origin.
EPCG covers import of capital goods (machinery, equipment) at 0% BCD with a future export obligation. Advance Authorisation covers import of raw materials and inputs required for manufacturing export products, at zero duty, linked to a specific export product and quantity. DFIA (Duty Free Import Authorisation) is transferable and issued post-export for raw materials. They serve different purposes and can be used together.